Outlook Money OLM - FEBRUARY 2018 | Page 52

Cover Story

Aashish Somaiyaa

CEO , Motilal Oswal Asset Management Company

In six years , data shows that there is a gradual shift towards direct plans as many large investors are choosing such plans and paying the distributors advisory fees

not need them anymore .

While technology is a big driver of this shift , distrust among consumers for the neighbourhood distributor is another reason why a lot of consumers are preferring technology platforms over human intermediaries . Also , a lot of information today is now available online at the click of a button . In the pre-internet era , the key disseminators of information were distributors , banks and agents . But now there are a host of digital platforms like fundsindia . com , policybazaar . com and online investment apps like Scripbox , providing both easy access to information and investment options to consumers . Explains Rakesh Jain ,

CEO of Reliance General Insurance , “ Structurally , we are moving from an information arbitrage system to information available system . The brick-and-mortar model with feet on the street is now in the past . All intermediaries need to evaluate and understand the shift in consumer behaviour , which is why agents are getting into the advisory role .”

Be it lenders , insurance companies or asset management companies , almost every player in the financial services space is looking at engaging with the customers directly . While the share of direct participation in mutual funds stands at 14 per cent ( retail ), the share of direct is much higher in the insurance space for some large players . Reacting to this trend early on , Aegon Life decided to do away with the agency business altogether two years ago . “ We were the pioneers in the online term insurance space and decided to take a step ahead by focusing on our direct channels , comprising the digital platform and in-house teams . Customers ’ comfort with digital is growing and we have seen our online sales for term products grow three times since the strategic shift in 2016 ,” explains Vineet Arora , MD and CEO , Aegon Life Insurance , which offers online products across term , health , endowment and Ulip categories , with term plans being the most popular of the lot . The insurer boasts of a term cover share of 60 per cent in its portfolio , while the category accounts for three to five per cent of other insurers ’ business mix . “ While the market for pure protection products has grown over the years , the launch of low-cost online Ulips has added an impetus to the commercial opportunity available . There is a visible inclination among customers towards buying products online ,” says Anuj Mathur , CEO , Canara HSBC OBC Life Insurance , adding that the Insurance Self Network Platform guidelines will further lead to more customer-centric solutions being offered through the online platform . Most insurers that Outlook Money spoke to said that while their agency business was growing at 20 per cent year-on-year , the business through the direct channel was growing at more than 50 per cent year-on-year .

The asset management business , on the other hand , has remained relatively tight-lipped about the direct channel , even though they are investing heavily in their direct channels , for fear of angering their base of distributors . But the writing is clearly on the wall . Consumers are expressing a keen interest in doing away with the conventional distributor channel because of a trust deficit . The question is : Should consumers go direct ? Outlook Money brings to you the pros and cons of going direct .

Investing directly in mutual funds : low cost option but risky

The disruption in the mutual

Share of Direct Investments on the Uptick in SIP Book of MFs

Investor Segment

Jan- 17

Feb-17 Mar- 17

Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17

Source : CAMS MFdex data ; ( Data as of Nov ’ 17 ) Amount in ` Crore

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Outlook Money February 2018 www . outlookmoney . com